<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-QSB/A
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended MARCH 31, 1998
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from to
----------------------- ----------------------
Commission file number: 000-23105
-----------------
AMERICAN INDEPENDENT NETWORK, INC.
(Exact name of small business issuer in its charter)
------------------
DELAWARE 752504551
(State or Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
6125 AIRPORT FREEWAY, SUITE 200
HALTOM CITY, TX 76117
(817) 222-1234
(Address and telephone number of principal executive offices)
-----------------
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes No X
-------- ---------
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date. AS OF JULY 10, 1998, THERE
WERE APPROXIMATELY 18,354,587 SHARES OF THE COMPANY'S COMMON STOCK ISSUED AND
OUTSTANDING.
Transitional Small Business Disclosure Format: Yes No X
------- -------
<PAGE> 2
PART I
FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
The following financial statements are filed as part of this
Registration Statement:
<TABLE>
<CAPTION>
Financial Statements: Page
--------------------- ----
<S> <C>
Comparative Balance Sheet (Unaudited) at March 31, 1998 and
March 31, 1997 F-1
Comparative Statement of Operations (Unaudited) for the
Three Months ended March 31, 1998 and 1997 F-3
Comparative Analysis of Stockholders' Equity (Unaudited)
Three Months ended March 31, 1998 and 1997 F-4
Comparative Statement of Cash Flows (Unaudited) for the
Three Months ended March 31, 1998 and 1997 F-5
Notes to Comparative Financial Statements (Unaudited) F-6
</TABLE>
2
<PAGE> 3
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Balance Sheet (Unaudited)
March 31,
ASSETS
<TABLE>
<CAPTION>
1998 1977
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 94,368 $ 164,172
Accounts receivable 2,250 14,730
Trade credits receivable 30,000 30,000
Note receivable, net of
doubtful account of $700,000 700,000 0
Prepaid expenses 0 236
---------- ----------
TOTAL CURRENT ASSETS 826,618 209,138
---------- ----------
PLANT, PROPERTY AND EQUIPMENT
Leasehold improvements 22,851 22,851
Equipment and furnishings 128,842 91,999
Digital compression equipment 834,769 627,001
---------- ----------
986,462 741,851
Accumulated depreciation (126,802) (59,700)
---------- ----------
TOTAL PLANT, PROPERTY AND EQUIPMENT 859,660 682,151
---------- ----------
OTHER ASSETS
Deferred tax benefits 0 207,477
Trade credits receivable, net of
allowance of $125,138 261,990 432,128
Other investments, net of
amortization of $34,484 863,104 2,463,933
Note Receivable, net of
doubtful account of $884,595 884,595 0
---------- ----------
TOTAL OTHER ASSETS 2,009,689 3,103,538
---------- ----------
TOTAL ASSETS $3,695,967 $3,994,827
---------- ----------
</TABLE>
THE ACCOMPANYING "NOTES TO FINANCIAL STATEMENTS" ARE
AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-1
<PAGE> 4
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Balance Sheet (Unaudited)
March 31,
<TABLE>
<CAPTION>
1998 1977
---------- ----------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 154,997 $ 236,726
Notes payable 2,330,188 1,562,843
Accrued interest - notes 177,317 95,986
Advances from affiliates 28,402 3,542
Customer deposits 0 20,000
Interest due preferred shareholders 37,440 25,000
Equipment lease payments 175,380 139,380
---------- ----------
TOTAL CURRENT LIABILITIES 2,903,724 2,083,477
---------- ----------
LONG TERM DEBT
Deferred income tax 930,071 0
Equip lease payments 184,973 235,617
---------- ----------
TOTAL LONG TERM DEBT 1,115,044 235,617
---------- ----------
TOTAL LIABILITIES 4,018,768 2,319,094
---------- ----------
STOCKHOLDERS' EQUITY
Preferred Stock - 1,000,000 shares $1 Par
Authorized - 1996 107,546 shares issued,
March 31, 1998 48,813 shares issued 48,813 217,795
Common Stock - 20,000,000 shares $.01 Par
Authorized, 1996 14,045,300 shares issued,
1998 18,354,797 shares issued 183,546 142,453
Additional Paid in Capital 4,673,351 2,937,664
Retained Earnings (Deficit) (4,759,761) (1,622,179)
Note Receivable ( 468,750) ( 0)
---------- ----------
TOTAL STOCKHOLDERS' EQUITY ( 322,801) 1,675,733
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $3,695,967 $3,994,827
---------- ----------
</TABLE>
THE ACCOMPANYING "NOTES TO FINANCIAL STATEMENTS" ARE
AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-2
<PAGE> 5
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Statement of Operations (Unaudited)
For the Three Months Ended March 31,
<TABLE>
<CAPTION>
1998 1977
---------- ---------
<S> <C> <C>
REVENUES
Income from network operations $ 53,463 $ 137,735
---------- ---------
COST AND EXPENSES:
Satellite rental 90,000 187,500
Programming expenses 844 8,055
Production expenses 24,429 24,982
Depreciation 13,620 5,800
Amortization of leasehold 1,200 1,200
Amortization of Senior Channel 34,484 0
Rental Expense (Net) 16,200 16,902
Administrative expenses 126,125 115,468
---------- ---------
TOTAL COST AND EXPENSES 306,902 359,907
---------- ---------
NET (LOSS) FROM OPERATIONS ( 253,439) (222,172)
---------- ---------
OTHER EXPENSES:
Interest expense (net) 84,966 72,743
Amortization of debt issue cost 0 40,000
Loss on conversion of bridge loans
to Common Stock 17,386 0
---------- ---------
Total Other Expense 102,352 112,743
---------- ---------
(LOSS) BEFORE INCOME TAXES ( 338,405) (334,915)
INCOME TAX BENEFIT (EXPENSE) 0 0
---------- ---------
NET (LOSS) $( 355,791) $(334,915)
EARNINGS PER SHARE OF COMMON STOCK $ (0.02) $ (0.03)
WEIGHTED AVERAGE SHARES 16,383,773 10,000,000
</TABLE>
THE ACCOMPANYING "NOTES TO FINANCIAL STATEMENTS" ARE
AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-3
<PAGE> 6
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Analysis of Stockholders' Equity (Unaudited)
For The Three Months Ended March 31, 1998
<TABLE>
<CAPTION>
Preferred Stock Common Stock Additional
------------------- ---------------------- Paid-in Note Retained
Shares Amount Shares Amount Capital Receivable Earnings
--------- -------- ---------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 31, 1996 107,546 $107,546 14,045,268 $140,453 $2,513,734 $ 0 $(1,494,741)
Preferred B Shares Issued 175,154 175,154 963,347
Issue cost of Preferred B (547,999)
Conversion of Preferred B
Shares to Common (229,273) (229,273) 458,546 4,585 224,688
Common Issued to Bridge
Loan Investors 1,521,039 15,210 380,260
Conversion of Bridge Loans 132,652 1,327 429,791
Sale of Common Stock 200,000 2,000 98,000
Sale of Common Stock for
a Note Receivable 1,875,000 18,750 450,000 (468,750)
Net Loss for the Year Ended
December 31, 1997 (2,640,982)
--------- -------- ---------- -------- ---------- --------- -----------
BALANCE DECEMBER 31, 1997 53,427 $53,427 18,232,715 $182,325 $4,511,821 (468,750) ($4,135,723)
Preferred Stock Conversions ( 4,614) (4,614) 9,230 93 4,522
Conversion of Bridge Loans 43,306 433 140,317
Common Issued to Bridge
Loan Investors 69,546 695 16,691
Net Loss for the Three
Months Ended March 31, 1998 (355,791)
--------- -------- ---------- -------- ---------- --------- -----------
BALANCE MARCH 31, 1998 48,813 $48,813 18,354,797 $183,546 $4,673,351 $(468,750) ($4,491,514)
</TABLE>
THE ACCOMPANYING "NOTES TO FINANCIAL STATEMENTS" ARE
AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-4
<PAGE> 7
AMERICAN INDEPENDENT NETWORK, INC.
Comparative Statement of Cash Flow (Unaudited)
For The Three Months Ended March 31,
<TABLE>
<CAPTION>
1998 1977
--------- ---------
<S> <C> <C>
CASH FLOWS PROVIDED (USED)
BY OPERATING ACTIVITIES:
Net (Loss) $(355,791) $(268,915)
Adjustment to reconcile net income to net
cash from operating activities:
Cost of loan conversion to common stock 17,386 0
Depreciation 13,620 5,800
Amortization of leasehold 1,200 1,200
Amortization of Senior Channel 34,484 0
Accounts receivable 0 ( 4,000)
Deferred tax benefit 0 ( 66,000)
Accounts payable ( 22,407) ( 47,610)
Accrued interest 57,787 ( 37,948)
Advances from affiliates 18,800 ( 1,500)
--------- ---------
TOTAL CASH USED BY OPERATING ACTIVITIES (234,921) (418,973)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in equipment ( 7,124) ( 25,856)
Investment in film library ( 3,929) 0
--------- ---------
TOTAL CASH FLOW FROM INVESTING ACTIVITIES ( 11,053) ( 25,856)
--------- ---------
CASH FLOWS PROVIDED BY FINANCING ACTIVITIES:
Notes payable increase 337,008 28,976
Long term lease decrease ( 31,434) ( 16,000)
Preferred stock increase 0 110,249
Common stock increase 0 2,000
Additional paid-in capital increase 0 423,930
--------- ---------
TOTAL CASH PROVIDED BY FINANCING ACTIVITIES 305,574 549,155
--------- ---------
Net Cash Increase 59,600 104,326
Cash, beginning of Period 34,768 59,846
--------- ---------
CASH AT END OF PERIOD $ 94,368 $ 164,172
--------- ---------
</TABLE>
THE ACCOMPANYING "NOTES TO FINANCIAL STATEMENTS" ARE
AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
F-5
<PAGE> 8
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
March 31, 1998 and 1997
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS - Consist of cash balances. Cash and Cash equivalents
consist of highly liquid investments with an original maturity date of ninety
days or less. The company does not have any cash equivalents.
TRADE CREDITS RECEIVABLES - The Company owns trade credits in the amount of
$417,128 at March 31, 1998 and $462,128 at March 31, 1997. As defined by the
International Reciprocal Trade Association, a trade dollar is a unit of account
that denotes the right to receive (receivable) or the obligation to pay (a
payable), one US dollar worth of goods and services within a barter system or
network. While all of the trade credits may be used by the company at any time,
the Company has shown a pattern of using $25,000 to $30,000 worth of the credits
in each of the past two years. Therefore the Company's trade credits are being
classified as current $30,000 and other assets of $387,128 at March 31, 1998.
The Trade Credits were obtained in 1994 in exchange for an Investment in Common
Stock and was valued at the fair value of the asset investment in common stock.
The Company uses the credits primarily for travel expense. The Company, also
exchanged Trade Credits for computer equipment and Fine Art. Management does not
consider impairment under FAS 121 is appropriate as management intends to fully
utilize the credits and the credits do not have an expiration date. Due to the
slow rate of usage the Company has established a valuation account of $125,138.
The trade group, the Company is a member of, currently has over twenty four
hundred participants. The Company can use these trade credits without any
infusion of cash except sales or excise taxes.
ACCOUNTS RECEIVABLE - Allowance for doubtful accounts. The company has accounts
receivable at March 31, 1998 of $2,250 owed by regular customers. Management
deems this amount to be fully collectible. No allowances for doubtful accounts
is necessary. At March 31, 1997 the total was $14,730.
PLANT, PROPERTY AND EQUIPMENT is recorded at cost.
DEPRECIATION - The cost of plant, property and equipment is depreciated over the
estimated useful life of the assets ranging from equipment at 5 years to
leasehold improvements at 20 years. Depreciation is on a straight line
basis.
Depreciation and amortization was $14,820 for the three months ended March 31,
1998 and $7,000 for the three months ended March 31, 1997.
INCOME TAXES - The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). SFAS 109 is an asset and liability approach that requires the recognition
of deferred tax assets and liabilities for the expected future tax consequences
of events that have been recognized in the company's financial statements or tax
returns. In estimating future tax consequences, SFAS 109 generally considers all
expected future events other than enactments of changes in the tax law or rates.
Income tax accounting information is disclosed in Note 3 to the comparative
financial statements.
F-6
<PAGE> 9
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
March 31, 1998 and 1997
USE OF ESTIMATES - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these estimates.
OTHER INVESTMENTS - Consist of the following:
<TABLE>
<CAPTION>
1998 1977
--------- ----------
<S> <C> <C>
Prepaid Media $1,426,933
Investment in stocks $196,455 200,000
Film Library 11,453 1,000
Investment in Senior Channel,
net of amortization of $34,484 655,196 0
Media trade due bills 0 836,000
--------- ----------
Total Other Investments $ 863,104 $2,463,933
--------- ----------
</TABLE>
NOTE 2 - NOTES PAYABLE
Notes Payable at March 31, 1998 consist of the following notes;
<TABLE>
<CAPTION>
Due Accrued
Creditor Date Interest Principal Interest
-------- ---- -------- --------- --------
<S> <C> <C> <C> <C>
Shelley Media
Marketing (1) 9/30/98 10% 50,650 1,266
Cleveland
Broadcasting Co.(1) 9/30/98 10% 17,933 500
ATN Network, Inc.(1) 9/30/98 10% 599,914 11,051
Pacific Acquisition
Group, Inc. 12/31/98 11% 250,500 6,262
Bridge Loan 10/31/97 15% 1,411,191 155,443
---------- --------
Total $2,330,188 $174,522
---------- --------
</TABLE>
(1) Affiliated Companies
Notes Payable at March 31, 1997 consist of the following notes;
<TABLE>
<CAPTION>
Due Accrued
Creditor Date Interest Principal Interest
-------- ---- -------- --------- --------
<S> <C> <C> <C> <C>
Lyn Broadcasting
Corporation (1) 8/31/97 10% $ 4,500 $17,047
Shelley Media
Marketing (1) 9/30/97 10% 51,100 10,398
Cleveland
Broadcasting Co.(1) 9/30/97 10% 37,053 7,654
ATN Network, Inc.(1) 9/30/97 10% 22,338 21,739
Pacific
Acquisition Group 12/31/97 11% 435,500
Bridge Loan 10/31/97 15% 1,137,750 37,603
Less Cost of Bridge Loan Acquisition (125,398)
---------- -------
Total $1,562,843 $94,441
---------- -------
</TABLE>
(1) Affiliated Companies
F-7
<PAGE> 10
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
March 31, 1998 and 1997
The Company has engaged in transactions with certain other enterprises that are
affiliated companies. These companies are controlled by the management and
principal stockholders of American Independent Network. The controlled companies
transactions are as follows:
<TABLE>
<CAPTION>
1998 1997
Funds Funds
--------------------- ------------------
Borrowed Repaid Borrowed Repaid
-------- ------ -------- ------
<S> <C> <C> <C> <C>
Cleveland Broadcasting $0 $8,156 $0 $1,222
San Antonio Broadcasting $0 $3,700 $0 $0
TV Channel 22 $22,500 $0 $0 $1,500
ATN Network $334,500 $18,826 $0 $3,028
Shelley Media Marketing $0 $450 $0 $0
</TABLE>
NOTE 3 - INCOME TAXES
Deferred income tax liability consist of the following components:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Provision for Income Taxes
Current 0 0
Deferred Liability 0 0
Deferred tax asset 0 ( 0)
--------- -------
Total Provision for Income Taxes 0 ( 0)
--------- -------
</TABLE>
The tax effects of temporary differences which
give rise to deferred income by assets and
liabilities consist of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
Deferred income tax assets
Valuation allowance 475,724 0
Net operating loss 207,477 207,477
Deferred income tax liabilities
Installment sale method on Notes Payable (1,137,548) 0
Valuation allowance ( 207,477) ( 0)
--------- -------
Net deferred tax asset liability ( 661,824) 207,477
--------- -------
Reconciliation of statutory U.S. tax rate with
effective tax rate:
Statutory U.S. tax rate on pretax loss 0% 0%
Average tax rate on temporary differences 0 0
Average tax rate on change in valuation allowance 0 0
-- --
Effective tax rate 0 0
-- --
</TABLE>
F-8
<PAGE> 11
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
March 31, 1998 and 1997
NOTE 4 - SUPPLEMENTAL CASH FLOW INFORMATION
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Cash used for:
Interest $ 17,520 $68,216
Income Taxes $ 0 $ 0
</TABLE>
NOTE 5 - DISBURSEMENTS FROM BRIDGE LOAN PROCEEDS
AND PREFERRED STOCK SALES
Financing activities during 1997 and 1996 consisted of bridge loans ($2,057,750)
and preferred stock sales ($1,837,551). The disbursements from the financing
escrows were $1,933,499 to the operating account, $1,402,802 for
issue costs and $559,000 for debt repayment.
NOTE 6 - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instrument for where it is practicable to estimate
that value:
Notes Receivable - The carrying amount approximates fair value because each is
valued at estimated discounted future cash flows.
Long Term Investments - The fair value of these investments are estimated based
on quoted market prices for those and similar investments.
Notes Payable - The carrying value approximates fair value because of the short
maturity date of these investments.
The estimated Fair Values of the Company's Financial Instruments are as follows:
<TABLE>
<CAPTION>
1998 1997
---------------------- ---------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Notes Receivable $1,584,595 $1,584,595 0 0
Long Term Investments $196,455 $390,910 $1,037,000 $1,037,000
Accounts Payable $154,997 $154,997 $236,726 $236,726
Equipment Lease Payments $360,353 $324,318 $374,997 $333,747
Notes Payable $2,330,188 $2,330,188 $1,562,843 $1,562,843
</TABLE>
F-9
<PAGE> 12
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
March 31, 1998 and 1997
NOTE 7 - LEASE OBLIGATIONS AND LONG TERM DEBT DISCLOSURE
The Company is obligated on three leases. The leases are as follows:
Building - The Company utilizes the spaces as both corporate offices and
studios. The lease is $5,400 per month and expires May 31, 1998.
Equipment - The Company has entered a master equipment lease (digital
compression equipment) for a period of thirty-six months ending December 31,
1999. The lease has a fair market value purchase option at the end of the lease.
Total lease obligation is $390,996 and the lease has been treated as a capital
lease. In May 1997, the Company entered into a lease for additional digital
equipment for a period of 36 months with payments of $4,302 per month. The lease
period is from June 1, 1997 to May 1, 2000. The lease has been capitalized.
Satellite - The Company leased satellite transponder space under an initial
operating lease. The lease is for three years ending July 31, 1999 with a total
lease obligation of $2,250,000. The Company has modified its lease reducing its
satellite band width from 24 MHZ to 8 MHZ which reduces its future lease cost
from $1,187,500 to $619,848 under the lease modification. The Company pays the
new lease balance at the rate of $30,000 per month during the period January 1,
1998 through July 1, 1999 when the lease terminates.
Details of lease obligations are as follows:
<TABLE>
<CAPTION>
Capitalized Capitalized Operating
Equipment Equipment Transponder
Lease #1 Lease #2 Lease
----------- ----------- ---------
<S> <C> <C> <C>
1998 $139,380 $51,624 $360,000
1999 $139,380 $51,624 $210,000
2000 $ 24,237 $21,510
</TABLE>
NOTE 8 - SALE OF ASSETS
AIN entered into an Agreement with Media Fund, Inc. dated December 10, 1997.
This Agreement materially affects the financial statements and AIN daily
operations.
Media Fund, Inc. under the provisions of the above agreement, gave to AIN a
promissory note in the amount of $5,000,000. The agreement has certain
restrictions as to the use of funds received from Media Fund, Inc. (See
below).
F-10
<PAGE> 13
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
March 31, 1998 and 1997
AIN exchanged the following assets of the Company for the $5,000,000 promissory
note:
<TABLE>
<CAPTION>
<S> <C>
Note Receivable (Present Value) $3,637,940
Common Stock (1,875,000 shares @ $.25) 468,750
----------
3,169,190
----------
BOOK VALUE OF ASSETS SOLD
Prepaid television inventory 1,426,933
Other long term assets (trade due bills) 837,000
Accounts Receivable (Inet, Inc.) 120,000
----------
2,383,933
----------
GAIN ON SALE $ 785,257
----------
</TABLE>
Media Fund, Inc. payment schedule on promissory note:
<TABLE>
<S> <C>
Due within 12 months
May 30, 1998 50,000
June 30, 1998 750,000
September 30, 1998 300,000
December 30, 1998 300,000
---------
1,400,000
Due beyond 12 months
March 30, 1999 300,000
June 30, 1999 300,000
December 31, 2002 3,000,000
---------
3,600,000
---------
</TABLE>
MEMO: An allowance for Doubtful Accounts in the amount of $1,584,595 has been
established due to incomplete financial information on Media Fund, Inc. The
note is un-collateralized.
RESTRICTIONS ON CASH RECEIVED:
Eighty percent (80%) of the first $2,000,000 or $1,600,000 must be used to
purchase IRD (digital to analog converters) equipment, and towards the Company's
goal of reaching seventy million (70,000,000) households nationally.
ADDITIONAL CONDITIONS OF THE ABOVE AGREEMENT:
1. Media Fund, Inc. receives twenty percent (20%) of all spots of AIN, HTN, and
Senior Network for a period of four years beginning December 10, 1998 with three
(3) renewal options of five (5) years each.
2. Media Fund, Inc. was issued 1,875,000 shares in AIN, HTN (Hispanic Television
Network) and Senior Network.
F-11
<PAGE> 14
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
March 31, 1998 and 1997
3. Media Fund, Inc. will provide up to twelve (12) hours of Network quality
programming per day which AIN agrees to air. The commercial spots due Media
Fund, Inc. per the agreement will be used by Media Fund, Inc. for Media Fund
clients.
NOTE 9 - PREFERRED STOCK
Preferred stockholders' may convert one share of preferred stock into two shares
of common. Preferred stockholders' also receive nine percent interest per annum
in lieu of dividends. Summary of preferred stock transactions are as follows:
<TABLE>
<S> <C>
Number of Preferred B Shares sold in 1996 per
Comparative Analysis of Stockholders' Equity 107,546
Number of Preferred B Shares sold in 1997 per
Comparative Analysis of Stockholders' Equity 175,154
-------
Total Number of Preferred B Shares Sold 282,700
Number of Preferred B Shares converted to Common Stock at
December 31, 1997 at the rate of two Common for each
Preferred B, which would equal 458,546 shares of Common (229,273)
Number of Preferred B Shares outstanding at December 31, 1997 53,427
Number of Preferred B Shares converted to Common Stock
during the three months ended March 31, 1998 at the
rate of two Common for each Preferred B, which would
equal 9,230 shares of Common ( 4,614)
-------
Number of Preferred B Shares outstanding at March 31, 1998 48,813
-------
</TABLE>
NOTE 10 - SENIOR CHANNEL
In 1997, the Company acquired the Copyright to the Senior Channel in exchange
for programming services in the amount of $689,680 that was billed at standard
programming rates. The Senior Channel has twenty four hour programming per day.
The Company's cash plan projections indicate the cost will be recovered in four
to five years. The Company continues to evaluate this asset quarterly and will
amortize the cost over five years. The amortization during the three months
ended March 31, 1998 was $34,484.
NOTE 11 - INVESTMENT IN COMMON STOCK
The Company owns 368,100 shares of Quick Tent, Inc. (NASD Small Cap QTNT).
The Company sold Quick Tent, Inc. stock in November 1997 at $1.085 per share.
The quoted market value at December 31, 1997 was $1.062 per share. The costs
basis in the financial statements is $0.523 per share for a capitalized amount
of $196,455. This investment is included in Other Assets.
F-12
<PAGE> 15
AMERICAN INDEPENDENT NETWORK, INC.
Notes To Comparative Financial Statements (Unaudited)
March 31, 1998 and 1997
NOTE 12 - FILM LIBRARY
The Film Library consists of approximately 2,000 films and television produced
tapes at a cost of $11,453.
NOTE 13 - BRIDGE LOAN
Bridge Loan holders have the option of converting their loans to Common Stock at
$3.25 per share. Loans in the amount of $140,745 were converted into 43,306
Common Shares during the three months ended March 31,
1998.
To equate the difference between market price of $.025 and conversion price of
43.25 and additional 69,546 Common Shares were issued. The market value of $.025
per share was derived from 1997 valuation based on sales of shares discounted
for the much larger number of shares involved and the restrictions on the stock.
NOTE 14 - RECONCILIATION OF CHANGES IN NOTES PAYABLE TO CASH FLOW GENERATED BY
INCREASE IN NOTES PAYABLE
<TABLE>
<S> <C>
Notes Payable at March 31, 1998 $2,330,188
Notes Payable at December 31, 1997 2,133,930
----------
Net Change 196,258
Notes paid by Conversion to Common Stock 140,750
----------
Cash Flow generated by Note Payable $ 337,008
----------
</TABLE>
NOTE 15 - GOING CONCERN
As shown in the accompanying financial statements the company has had recurring
net operating losses resulting in cash flow problems. All of the Company's debt
is short term resulting in a substantial current ratio deficit (current
liabilities and long term liabilities due within twelve months are greater than
current assets and assets available for use within twelve months) These
circumstances raise substantial doubt as to the Company's ability to continue as
a going concern. Such conditions may prevent the Company from meeting its
liabilities within a timely manner.
Management fully believes it will lease a minimum of two satellite access
channels. This in conjunction with the collection of short term notes receivable
and normal operating revenues will provide the Company sufficient cash flow to
continue as a going concern and to reach its penetration of households (viewers)
goals for the year.
The financial statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.
F-13
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS.
Revenues
For the three months ended March 31, 1998, revenues were $53,463 and for the
comparable three month period in 1997, revenues were $137,735. The decrease in
1998 revenues was due to decrease in digital channel lease revenues by $80,000.
Cost of Operations
For the three months ended March 31, 1998 and March 31, 1997, cost of operations
were $115,273 and $220,537, respectively. The $105,264 decrease in cost of
operations for the three months ended March 31, 1998 is due primarily to the
$97,500 decrease in the cost of satellite expense and $7,211 decrease in the
cost of programming.
General and Administrative
For the three months ended March 31, 1998 general and administrative expenses
were $126,125 and for the three months ended March 31, 1997, general and
administrative expenses were $115,468. The $10,657 increase in general and
administrative expenses for the three months ended March 31, 1998 is due to
general increases in administrative expenses.
Operating Loss
For the three months ended March 31, 1998, the Company's operating losses were
$253,439 and for the comparable period in 1997, the Company's operating losses
were $222,172. The loss before income taxes for the three months ended March 31,
1998 was $338,405 as compared to a loss before income taxes for the three months
ended March 31, 1997 of $334,915. Net loss for the three months ended March 31,
1998 was $355,791 as compared to a net loss for the three months ended March 31,
1997 of $334,915. The loss before income taxes in 1998 is $3,490 more than the
1997 loss for the similar period and is due primarily to decreases in the
satellite expenses of $97,500 and amortization of debt issue cost of $40,000
being less than the amortization of The Senior Channel of $34,484 and the
decrease in revenues caused by the decrease in digital satellite lease revenues.
Net Loss
For the three months ended March 31, 1998 and March 31, 1997, net loss per share
was $.02 and $.03, respectively.
3
<PAGE> 17
PART II
OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
Exhibit Number Title of Exhibit
- -------------- ----------------
<S> <C>
3.1 Articles of Incorporation of the Company, as amended (1)
3.2 Bylaws of the Company, as amended (1)
4.1 Form of Warrant Agreement (1)
10.1 Lease for Offices (1)
10.2 Employment Agreement with Dr. Donald W. Shelton (1)
10.3 Employment Agreement with Randy Moseley (1)
10.4 Stock Option Agreement with Dr. Donald W. Shelton (1)
10.5 Stock Option Agreement with Randy Moseley (1)
10.6 Form of License Agreement (Affiliate Agreement) (1)
10.7 GE Americom Lease Agreement (1)
10.8 Master Lease with Insight Investments (1)
10.9 Promissory Note Extension Agreement with Lyn Broadcasting
Corporation (1)
10.10 Promissory Note Extension Agreement with Shelly Media Marketing (1)
10.11 Promissory Note Extension Agreement with Cleveland Broadcasting Co.(1)
10.12 Promissory Note Extension Agreement with ATN Network, Inc.(1)
10.13 Promissory Note with Super Six, Inc.(1)
10.14 Promissory Note with Jim Thornbo (1)
10.15 Promissory Note with Logistic Services International, Inc.(1)
10.16 Promissory Note with Rajendra Shah (1)
10.17 Promissory Note with Gary Lamberg (1)
10.18 Promissory Note with Frank Lyons (1)
10.19 Loan and Security Agreement with Midas Fund (1)
10.20 United State Federal Communications Commission Radio Station Authorization(1)
10.21 Form of Programming Agreement(2)
10.22 Promissory Note with ATN Network, Inc.(2)
10.23 "All News Channel" Agreement(2)
10.24 Promissory Note Extension Agreement with Super Six, Inc.(2)
10.25 Promissory Note Extension Agreement with Logistics Services, Inc.(2)
10.26 Promissory Note Extension Agreement with Shelly Media Marketing Corporation(2)
10.27 Promissory Note Extension Agreement with Cleveland Broadcasting Corporation(2)
10.28 Promissory Note Extension Agreement with ATN Network Inc.(2)
10.29 Form of Equipment Agreement(2)
10.30 Channel Use and Programming Agreement with Dominion Sky Angel(2)
10.31 Agreement of Settlement, Compromise and Assignment(2)
</TABLE>
4
<PAGE> 18
<TABLE>
<S> <C>
10.32 Assignment of Senior Channel(2)
10.33 Agreement with Media Fund, Inc.(2)
10.34 1995 Stock Option Plan(2)
10.35 Promissory Note and Amendment to Agreement(3)
27.1 Financial Data Schedule
</TABLE>
(1) Previously filed as an exhibit to the Company's Registration Statement
on Form 10-SB (File No. 000-23105), filed with the Securities and
Exchange Commission on September 19, 1997.
(2) Previously filed as an exhibit to the Company's Pre-Effective Amendment
No. 2 to the Registration Statement on Form 10-SB (File No. 000-23105),
filed with the Securities and Exchange Commission on April 10, 1998.
(3) Previously filed as an exhibit to the Company's Amendment No. 4 to the
Registration Statement on Form 10-SB (File No. 000-23105), filed with
the Securities and Exchange Commission on July 15, 1998.
The Company did not file any Current Reports on Form 8-K during the fiscal
quarter ended March 31, 1998.
5
<PAGE> 19
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN INDEPENDENT NETWORK, INC.
Date: July 14, 1998 /s/ Donald W. Shelton
----------------------------
Dr. Donald W. Shelton, Chief
Executive Officer
Date: July 14, 1998 /s/ Randy Moseley
----------------------------
Randy Moseley, President and
Chief Financial Officer
6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
UNAUDITED FINANCIAL STATEMENTS FOR FISCAL QUARTERS MARCH 31, 1998 AND 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) 10-QSB/A.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 94,368
<SECURITIES> 196,455
<RECEIVABLES> 2,250
<ALLOWANCES> 1,584,595
<INVENTORY> 0
<CURRENT-ASSETS> 826,618
<PP&E> 859,660
<DEPRECIATION> 126,802
<TOTAL-ASSETS> 3,695,967
<CURRENT-LIABILITIES> 2,903,724
<BONDS> 0
0
217,795
<COMMON> 183,546
<OTHER-SE> (555,160)
<TOTAL-LIABILITY-AND-EQUITY> 3,695,967
<SALES> 53,463
<TOTAL-REVENUES> 53,463
<CGS> 0
<TOTAL-COSTS> 306,902
<OTHER-EXPENSES> 102,352
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 84,966
<INCOME-PRETAX> (338,405)
<INCOME-TAX> 0
<INCOME-CONTINUING> (355,791)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (355,791)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A)
UNAUDITED FINANCIAL STATEMENTS FOR FISCAL QUARTERS MARCH 31, 1998 AND 1997 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) 10-QSB/A.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 164,172
<SECURITIES> 200,000
<RECEIVABLES> 14,730
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 209,138
<PP&E> 682,151
<DEPRECIATION> 59,700
<TOTAL-ASSETS> 3,994,827
<CURRENT-LIABILITIES> 2,083,477
<BONDS> 0
0
217,795
<COMMON> 142,453
<OTHER-SE> 1,315,485
<TOTAL-LIABILITY-AND-EQUITY> 3,994,827
<SALES> 137,735
<TOTAL-REVENUES> 137,735
<CGS> 0
<TOTAL-COSTS> 359,907
<OTHER-EXPENSES> 112,743
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,743
<INCOME-PRETAX> (334,915)
<INCOME-TAX> 0
<INCOME-CONTINUING> (334,915)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (334,915)
<EPS-PRIMARY> (0.03)
<EPS-DILUTED> (0.03)
</TABLE>
